Bilski: Pandora’s Box or Panacea?- I

In the last post, we had reported in brief on the much-awaited decision of the US Supreme court in Bilski v. Kappos (with a few inaccuracies on my part). Just so that we don’t lose out on such an important development and of course, a delicious rousing heated debate, I thought it best to open the decision for discussion/debate with a few preliminary thoughts (because the judgment merits more than a single reading, particularly Justice Stevens’ brilliant opinion, which at times takes a withering tone).

In this post, we deal with the facts of the case and Justice Kennedy’s opinion; the next post shall discuss Justice Steven’s opinion.

The facts of the Bilski case in short are as follows:
1.    1. Bilski’s application broadly claimed a series of steps for hedging risks involved in commodity transactions. It also specifically claimed the use of these series of steps with respect to transactions where energy is the commodity.

2.     2. The application was rejected by the examiner on grounds that it was not directed to technological arts —> since (1) the steps were not implemented on a specific apparatus and (2) it merely manipulates an abstract idea without limiting the use of the series of steps to a particular application.

3.    3.   The Board of Patent Appeals and Interferences (BPAI) affirmed the examiner’s decision but rejected his contention that the invention must relate to technological arts or must be performed on a machine to be eligible for a patent. The BPAI held the application disclosed a mere abstract idea which did not transform physical subject matter.

4.    4.  The Federal Circuit (FC) held the application ineligible on grounds that neither was it tied to a machine nor did it transform an article into a particular state or a thing, a.k.a machine-transformation test a.k.a MT test.

US Supreme Court
A. Justice Kennedy- Delivering the Opinion of the Court

Justice Kennedy’s opinion touches three aspects of the case- 1) exclusive application or otherwise of the MT test, 2) patent eligibility or otherwise of a patent application which claims a business method and 3) if the Bilski application merely discloses an abstract idea.

1) MT Test

On the MT test, Justice Kennedy, speaking for the Court, states that the test is not to be construed as the sole/exclusive test for determining the patent eligibility of an application. He says so because such exclusive application of the test would preclude genuinely patent eligible efforts from the scope of section 101 of the US Patents Act (which permits grant of a patent for processes, machines, manufactures, composition of matter, or material).

In other words, positing the MT test as the sole test would rob section 101 of its dynamism. This dynamism is necessary to ensure that “unforeseen innovations” are covered by section 101. Further, he takes the view that the MT test is better suited for inventions of the “Industrial Age”, but may not be adequate to address eligibility issues in the “Information Age”. He says, in trying to apply the test for a hitherto un-envisaged class of inventions, an examiner may lose sight of genuinely valuable contributions from a whole range of endeavours.

Having stated that the MT test is not an exclusive test, he hastens to clarify that the Court in this judgment does not attempt to define the contours of a new test for technologies of the information age, for that could have an adverse effect on the examination of such technologies. In other words, he leaves the formulation of a new test for the future, if and when the occasion calls for it.

2) Business Method Applications
He then proceeds to deal with the status of business method applications. He rejects the contention that the term “process” must be given a restrictive interpretation since the neighbouring terms used in section 101 are machine, manufacture, composition of matter, material. This rejection is based on the fact that process has been expressly defined in the Act and, when the Act provides for an express definition, it prevails over other interpretations. (interestingly, process has been defined in a tautologous manner in section 100 to mean “process, art or method, and includes a new use of a known  process…..”)

Since process has an independent definition, he rejects the sole use of the MT test which may find better application in the rest of the categories enumerated in section 101.

He further states that there is no statutory support to preclude grant of patents to business methods, and that such methods qualify as “processes” under section 101. This, according to him, is based on ordinary, contemporary and common meaning of the word “process”, with no indication from the Act that such meaning is contrary to legislative intent.

In fact, according to him, business methods receive support from Section 273(b) of the Act. Section 273(b) provides an alleged infringer a defense against infringement on grounds that the “method in the patent” had been used prior to the filing of the patent. Further, he points out that Section 273(a)(3) defines method for the purpose of this defense, as a “method for doing or conducting business”.

Therefore, according to him, since the Act acknowledges the presence of business methods as a subset of processes and provides a defense only on grounds of prior use, business methods cannot be precluded from the definition of process in section 100.   

Consequently, he holds business methods as patent eligible, with a rider that the standard for evaluating them must be higher given the nature of subject-matter dealt with by such applications. In other words, the standards under sections 102, 103 and 112 must be adhered to more stringently for business method applications, according to him.

3) The Bilski Application

As for the conclusion that the Bilski application is nothing more than an abstract idea, he opines that the tests laid out in Gottschalk v. Benson, Parker v. Flook and Diamond v. Diehr are sufficient for the purposes of this application, without the Supreme Court having to come out with a different test.

Of these three precedents, Benson was relatively less complicated because it involved an algorithm to convert binary-coded decimal numeral to pure binary codes. Therefore, it was easier to conclude that it was a mere mathematical formula.

Flook  and Diehr have comparatively more meat to chew. In Flook, the application was for a procedure to monitor catalytic conversions in petrochemical and oil-refining industries. So in Flook, the Court held that notwithstanding the industrial context to which the application was sought to be used, the fact remained that the claim was on a principle, which is ineligible subject-matter.

As for Diehr, a mathematical formula was used to complete the steps in a process for molding rubber into finished products. Therefore, since a principle of nature was being applied in a specific industrial process and not just context, the application was a process under section 101. In other words, the claim was for a technology and not an abstract idea. Of these 3 precedents, Diehr comes closest to the MT test because the invention disclosed was used for transformation of an article.

Applying these to the Bilski application, Justice Kennedy compares the broad claims on hedging to the claims in Benson and holds the application to be a mere abstract idea. He then rejects the specific claims of the application on use of the method in energy markets, by equating it to the invention in Flook. In other words, restricting the use of a principle to a specific context without giving it a technological kernel does not change the fact that what is claimed is essentially an abstract idea.

It is clear that to conclude that the Bilski application claims an “abstract idea”, one needs a syllogistic underpinning. Therefore, Justice Kennedy’s conclusion has to necessarily flow on the basis of some test to determine what would be an eligible process under section 101. Since no new test has been proposed, he goes on to rely on benson and flook together. 

Nowhere does he state that he relies on Diehr or the MT test to arrive at the finding of abstraction in the Bilski applicationSo it could be said that the principle of Diehr and the MT test were endorsed as useful investigative tools (not as exclusive tests), but were not applied in this case since they were not required according to the Court. 

On second thought, if the decision in Diehr is to be treated as being not just consistent with the tests laid down in benson and flook, but also as being subsumed in flook, then we might say that the Court applied all the 3 precedents, and in a way applied the MT test to hold the Bilski application ineligible.

In the next post, Justice Steven’s concurring opinion will be discussed, although he differs in no uncertain terms with Justice Kennedy in the path he takes to reach the same conclusion.

We welcome the opinions of our readers…


  1. AvatarAnonymous

    Hi Sai,
    I agree with you in the earlier blog when you said “i think it’s better that the Court did not propose tests which were not necessary for adjudicating Bilski because that could have affected several applications which are under prosecution.” I think the Supreme Court gave a fair reading on the case and did not opine broadly. I dont think this would have been the occasion to make sweeping judgements about whether software or diagnostic patents are “patent eligible”. I am glad MT is not the sole decider, leaving leeway for prosecutors to argue against an MT based rejection. That said, the USPTO has said that it will continue using the MT test.
    I know a lot of people are unhappy with the lack of clarity, but this case is hardly the one that should merit broader strokes.

  2. AvatarGena777

    The Supremes’ opinion was maddeningly, if perhaps necessarily, short on specifics, definitions, or the means of determining patentability. Therefore, it represented, more than anything, a maintaining of the status quo in patent law. The main difference is that, instead of stewing over machines and transformations, we’ll all be trying to figure out what exactly is an abstract idea. Meet the new boss, same as the old boss.


Leave a Reply

Your email address will not be published.